Equity Financing Lurks Before Dawn: In 2019, The Scale Will Be Nearly Cut, And Policy Easing Will Turn To A Strong Rebound In 2020.

A few years later, looking back at the many milestone events in the capital market in 2019, we will find that this year is an important turning point for the reform of capital market.

The same is true for equity financing in the capital market. The market has entered a rather long period of downturn since the strict regulatory policy since 2017.

However, by the end of 2018, especially in 2019, there was a huge change in the direction of supervision and the market policy environment, behind which is to further enhance the financing function of the capital market, and equity financing is naturally the leader.

The data also clearly reflected the choice of market participants and the scale of different financing channels under the policy change. In 2019, the scale of IPO financing increased under the support of the science and innovation board. However, as a pillar of equity financing in the capital market, the scale of refinancing has reached a new low of 14 years. In addition, the new three board market also hit bottom on the eve of the reform policy, and the scale of financing increased to 26 billion 400 million in 2019.

Policy first, market feedback will always lag behind. In 2019, equity financing data fell to the bottom. From another perspective, it was the last darkness before the bottom up. In 2020, the market held a very optimistic attitude towards the recovery of equity financing and the further promotion of direct financing ratio.

2019 finish touching the bottom.

Although the scale is never the biggest, IPO's financing scale has always been regarded as the core channel of equity financing, so it is also highly concerned by the market.

Compared with the downturn in the overall equity financing market in 2019, there was a certain improvement in the IPO financing. From the data point of view, the scale of IPO financing in 2019 was 253 billion 200 million, and the number of companies that completed IPO financing reached 203, and the two data increased by 83% and 93% respectively compared with 2018.

However, the scale of IPO financing increased in 2019 largely thanks to the establishment and opening of the science and technology board. As of the end of 2019, a total of 70 companies were successfully listed on the GEM board, with a total financing amount of 82 billion 400 million yuan, accounting for 32% of the total financing of the A share IPO market. In less than 6 months after the opening of the market, the amount of financing of the science and technology board has far exceeded the sum of the annual financing amount of the SME board and the gem.

"But apart from the data of the science and technology board, the original IPO channel has not been much improved compared with the data in 2018. It is well known that in 2018, due to tighter regulation and regulatory control rhythm, the number of enterprises and the scale of financing in IPO had a significant decline compared with that in 2017. Therefore, the data of 2019 IPO pass are not as good as the overall data." A large brokerage company in Beijing area told reporters.

In fact, from the scale of equity financing in the capital market, refinancing is a larger financing channel, of which non-public offering is commonly known as fixed financing products.

In 2017, the CSRC set off a tightening of regulation, the first to bear in mind is the issue of non-public offering. This effect is still fermented in 2019. The scale of non-public offering financing has hit the lowest point since 2014, which is 679 billion 800 million yuan, while the peak of 2016's non-public offering financing amounted to 1 trillion and 600 billion yuan.

However, since the end of 2018, relevant regulation is being gradually relaxed, but some core provisions have not been relaxed, making the non-public offering rebound very limited.

Zhang Xia, chief strategist of China Merchants Securities, also pointed out that there were about 226 companies offering additional shares in 2019, and the size of the additional financing was down 20.6% compared with last year. The reason is that the price fixing mechanism has not been relaxed and the restriction of the new regulation is the two main reason for increasing the market's difficulty.

She said: "on the one hand, after the tightening of the policy in 2016, the matching funds of non-public offering shares of listed companies should be no less than 90% of the average stock price of the 20 trading days before the first day of issue, which led to a marked decline in the rate of increase in discount rates, and the arbitrage space that the agency participated in was increased. On the other hand, under the requirements of the new regulation, the reduction period of investors is lengthened, arbitrage uncertainty increases and investor participation enthusiasm decreases.

But in the field of refinancing, a strong product appeared in 2019, which is convertible bonds. In 2019, the scale of convertible bond financing reached 260 billion yuan, and the emergence of this product also dragged down the refinancing continued to decline.

However, to some extent, convertible bonds can not take the place of fixed growth. In addition, the market also generally anticipate that after the 2020 refinancing policy changes, there is no room for growth in the scale of convertible bonds.

Since 2014, the new three board market is also an important battleground for equity financing, because there is no public issue arrangement when listing, so fixed increase financing is the most important equity financing channel for new three boards.

In 2019, the new three board increased financing has entered the extremely cold era. In the 2017 and 2018 years, the new three board market is still in the doldrums, but the scale can be maintained at a scale of about 60 billion. In 2019, the new three board fixed increase financing was only 26 billion 400 million yuan, such a decline is not only described by the waist. In addition, the number of enterprises financed by financing also showed a marked decline.

"There is a certain delay in the data feedback of the new three boards, but it also reflects the market's view before the three quarter of 2019. The market is not going to get ahead, and the money will not go to the market again." A medium-sized brokerage firm of new three board business in Beijing area told reporters.

To sum up, we can see that equity financing channels in many capital markets have reached a period of time or even a historical low. But in 2019, it was the year when the policy environment shifted and a number of targeted documents landed. That is to say, in 2019, equity financing really hit bottom, and the scale of equity financing will fully recover in 2020.

2020 recovery channel

The 2019 policy easing cycle is all inclusive, including further consolidation of mergers and acquisitions, the establishment of a comprehensive registration system and the deregulation of the refinancing policy, and the landing of the new three board market which has long been out of date. Under the help of the policy, equity financing will increase significantly in 2020.

The first is the scale of IPO financing. At present, the SFC's strong statement will maintain the existing rhythm of trial issuance, that is to say, the probability of large number of IPO trial companies will be maintained at around 80-100 in 2020.

However, the innovation of gem and gem will bring about the scale of incremental IPO financing, especially the reform of the gem. The registration system will be fully pushed forward. The scale of financing undertaken by IPO will be enlarged on the existing basis.

"One of the characteristics of registration system is that IPO supply is no longer subject to administrative control. At present, the science and technology board has made a demonstration. In 2020, the gem reform will surely come down on schedule. The registration system reform of gem will also contribute a lot of incremental IPO enterprises. Therefore, the overall scale of IPO financing in 2020 is much more than that in 2019." The foregoing Beijing securities brokerage investment bank executives think.

As for refinancing, the worst days are over. In November 8, 2019, the SFC raised public opinions on Amending the rules for the issuance of securities issued by listed companies and the refinancing rules for the issuance of securities issued by listed companies on GEM.

The refinancing policy changes can be divided into three main lines. First, it is to optimize the relevant policies of gem refinancing, followed by the issuance of the rules of refinancing of the science and technology board. Finally, the most important thing is to untie a number of provisions for tighten refinancing in 2017, such as lock up periods and discount efforts.

This policy change has finally fallen on the core provisions, which also makes the market very strong expectations for the recovery of this financing channel. According to the reporter's understanding, institutions and enterprises have begun to prepare for the formal landing of the policy.

"The revision of the merger and reorganization policy in October 2019 has eased the relevant policies on the backdoor and supporting financing of the gem, coupled with the refinancing rules to be revised in November, has relaxed the refinancing pricing and reduction rules, and is conducive to driving the market to pick up. So it is expected that the size of the increase will increase in 2020 after the regulatory environment is relaxed. Zhang Xia said.

For the equity financing market in 2020, the new three board market will be a pleasant surprise. Since October 25, 2019, the new three board reform has been launched, and a number of long-awaited policies that can affect the market actually have come to a successful conclusion.

In addition, the new three board market will also add an important equity financing channel, that is, the selective public offering. This system is similar to small IPO. The market expects that nearly 50 enterprises will be able to complete the public issue and select the selected layer in 2020, which will also contribute to a large scale of financing.